Updated from Nov. 24
With half of the 60-odd initial public offerings in the past 12 months in financial and health services, the IPO of retailer
can't help but stand out. The company joins the ranks of just three other companies in the retail group that have gone public since last November.
Beaumont, Texas-based Conn's, which sells major home appliances, consumer electronics, home office equipment and lawn products, priced 4.15 million shares late Monday at $14 each, at the high of its $12-to-$14 price range.
Conn's follows three other recent offerings in the retail/restaurant sector:
Buffalo Wild Wings
, which went public on Nov. 21,
on Oct. 23, and
( REDE) on Sept. 24.
So why are so few retailers going public when retail sector stocks are enjoying a mighty good run of late? Shares of retailer
, for example, are up 129% year over year, while shares of
( HOTT) have climbed 90% since last November.
Most privately owned retailers don't have the sex appeal found in other industries and lack Conn's promise, said David Menlow, president of IPOFinancial.com. "Retail is all about caterpillar growth and caterpillar financial improvement. They're slow and steady and generally have tremendous vulnerability to financial aspects in the market place," he said.
Conn's, on the other hand, has a revenue growth rate of 17.4% annually and net margins in the 5%-and-higher range, said Menlow.
"Conn's is the No. 1 or No. 2 in home appliance sales in the majority of its retail markets," said Francis Gaskins, co-editor of IPOdesktop.com. That makes it stand apart from other privately held retailers, which is a prerequisite for companies looking to go public nowadays, he said.
"You have to be able to sell yourself on why people would remember you," said Gaskins. "The market likes leaders. The ones that aren't doing so well are trying to grow by acquisition. That doesn't apply in retail." Additionally, he said, companies need to have an established growth plan and be profitable, both of which apply to Conn's.
Generally, retail, unlike the financial and health care industries, is not the kind of sector that would "take people's breath away," said Menlow. Financial companies, for instance, now have greater visibility, thanks in part to lower mortgage rates.
While retail IPOs are less desirable in periods of uncertainty, if the economy continues to improve in 2004, there might be more of them.
"The market is still very twitchy for IPOs, and the bar is still very high as far as what will be expected," said Menlow.
With a market cap of $293 million, revenue of $450 million and net income of $19 million, Conn's offering is similar to most recent IPOs. That is, it is profitable and not a technology company, quite a switch from the market in the late 1990's.
Conn's was founded in 1890 and has about 42 stores in the southwestern U.S. with 1,800 employees. The underwriters of its IPO are Stephens and SunTrust Robinson Humphrey.
The company had announced its intent to go public on Sept. 23 and announced its terms on Oct. 29, but the stock market's recent slide caused enough uncertainty to upset the IPO calendar.
On Monday, for instance,
Nexstar Broadcasting Group
, an unprofitable regional TV company, had its 10-million-share offering priced at the low end of its $14-to-$16 range. Shares closed down 75 cents, or 5.4%, at $13.25 Monday.
Conn's, Nexstar and
( NWAC) spinoff, are all holdovers from last Friday, when they were initially scheduled to go public.
Pinnacle also announced late Monday that its 19.4 million shares priced at $14, below its $15-to-$17 price target. The IPO is led by Morgan Stanley. The company had net income of $27 million on sales of $411 million.
Shares of Buffalo Wild Wings, which started trading Friday, closed at $22.55 Monday, well above its offer price.
Four more IPOs are scheduled for this week, including moving company
, which announced early Tuesday that its 21.1 million shares priced at $18.50 a share. Also slated to go public this week are